Tesla Insurance’s Full Self-Driving (FSD) pricing poses a potential competitive risk to Lemonade’s auto insurance ambitions as its model scales, with pricing based on how the car performs in FSD through its Safety Score, potentially offering better rates, according to analysts at Jefferies.
Recent filings show Tesla has eliminated standalone discounts for FSD offered through its own carrier, Tesla Property & Casualty, Inc., and instead embeds autonomy entirely within its Safety Score framework, meaning pricing reflects how the vehicle actually performs.
Under Tesla’s model, autonomy is rewarded indirectly in that if it reduces hard braking and other risk signals, your Safety Score improves, but if it doesn’t, autonomy offers no explicit pricing discount.
By contrast, Lemonade treats FSD as safer on average and reflects this through per-mile pricing benefits for autonomy usage. This approach assumes lower loss risk regardless of how or where FSD is used and could potentially lead to cross-subsidisation of poor autonomy uses.
Jefferies analysts estimate that the discount, or lower premium potential, is higher for a good driver under Tesla’s new pricing model than under Lemonade’s FSD pricing, although the opposite is also true.
In theory, Jefferies believes Tesla’s pricing approach could become a competitive risk over time to a segment of Lemonade’s auto business. However, the two products differ in that Lemonade’s offering may be more targeted toward lower-mileage drivers, given its pay-per-mile structure, and may appeal to those seeking simpler and more predictable credits for autonomous usage. Further, the Lemonade FSD product offers greater stability due to the averaging of autonomy scoring, although mileage caps apply.
While Lemonade’s FSD product highlights how autonomy can improve safety on average, analysts believe that tying discounts to assumed benefits rather than observed outcomes risks rising loss ratios over time versus other approaches.
Tesla Insurance recently posted strong results for 2025, writing $1.0 billion in premiums, up from approximately $315 million in 2024 and $110 million in 2023. This compares to Root’s $1.2 billion and Lemonade’s $137 million. Tesla reported a 115% combined ratio, a ~10pts improvement from 125% in 2025. Two of Tesla’s three insurance entities were profitable in 2025, with the larger third realising a loss (focused largely on CA where telematics is not permitted).
